## _wp07298

## Source details

**Canonical URL:** [_wp07298](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07298.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07298.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07298.pdf.json)

---

### Introduction and principal findings
- Over the past two decades, labor markets have become increasingly integrated due to political changes and economic reforms in China, India, and the former Eastern bloc, and due to technological progress and removal of cross-border restrictions that permit the unbundling of production.
- Key questions addressed:
  - How rapidly has the global labor supply grown, and which channels of labor globalization have been most important?
  - To what extent can recent trends in labor shares and labor compensation in advanced economies be explained by the changing global labor supply relative to other factors such as technological change and labor market reform? Has the impact been different in skilled and unskilled sectors?
  - What policies can help advanced economies meet the challenges of further labor market globalization?
- Principal findings:
  - The effective global labor force has risen fourfold over the last two decades.
  - Advanced economies access the growing global labor pool via imports of final goods, offshoring of intermediates, and immigration.
  - The decline in traded goods prices from labor globalization has contributed to rising real labor compensation in advanced economies by boosting productivity and output, while emerging market countries have also seen rising real wages.
  - Globalization is one of several factors reducing the labor share in advanced economies; rapid technological change has had a bigger impact, especially on unskilled-sector workers.
  - Countries that enacted reforms to lower the cost of labor to business and improve labor market flexibility have generally experienced a smaller decline in the labor income share.

### How globalized is labor? — measures, channels, and patterns
- Measuring effective global labor supply:
  - One approach weights each country’s labor force by its export-to-GDP ratio; by this measure, the effective global labor supply quadrupled between 1980 and 2005, with most of the increase after 1990.
  - East Asia contributed about half of the increase, driven by a marked rise in working-age population and rising trade openness; South Asia and the former Eastern bloc accounted for smaller increases.
  - While most of the absolute increase consisted of less-educated workers (those without higher education), the relative supply of workers with higher education increased by about 50 percent over the last 25 years, owing mostly to advanced economies, but also to China.
- Channels of access to global labor:
  - Trade has been the more important channel and has grown more rapidly than immigration.
  - The share of immigrants in the U.S. labor force is now close to 15 percent and hence comparable to the share of imports in GDP.
  - The increase in the share of immigrants over the last ten years was driven mostly by foreigners with tertiary education or at least secondary education.
- Trade patterns and terms of trade:
  - The share of developing country products in the imports of advanced economies has doubled since the early 1990s.
  - Developing countries’ share in world exports of skilled goods and services has been on the rise; China has led this shift toward more skill-intensive goods in its export basket.
  - The terms of trade of advanced economies have improved, by a cumulative 7 percent since 1980.
- Offshoring and imported intermediates (selected statistics):
  - Offshored inputs account for about half of total imports.
  - Imports of intermediate manufacturing and services inputs (excluding energy) accounted for about 5 percent of gross output and about 10 percent of total intermediate inputs in advanced economies in 2003.
  - Share of offshored inputs in gross output: 12 percent in Canada and the Netherlands; about 2–3 percent in Japan and the United States.
  - For manufacturing (G-7, Australia, Denmark, Netherlands), imported manufacturing inputs in gross manufacturing output rose from 6 percent in 1980 to 10 percent in 2003.
  - In 2003, offshoring intensity in manufacturing ranged from 4 percent in Japan to about 25 percent in Canada.
  - Imports of service inputs by the overall economy were about 1 percent of gross output, with higher increases in Canada, Germany, the Netherlands.
  - The rise in offshoring in advanced economies has been driven mostly by imports of skilled rather than unskilled inputs.
  - Share of imported intermediates in total imports: unskilled products 37 percent; skilled products 68 percent.

### How globalization affected workers in advanced economies — theory and empirical patterns
- Theoretical expectations:
  - Traditional trade theory predicts integration of labor-abundant emerging markets will exert downward pressure on wages (corrected for productivity) of advanced-economy workers, implying a decline in the labor share of national income.
  - Offshoring and trade can also boost productivity and total income, increasing real wages despite reductions in labor share.
- Empirical patterns:
  - There has been a clear decline in the labor share across advanced economies since the early 1980s.
  - Decline magnitude since 1980:
    - Europe and Japan: about 10 percentage points.
    - Anglo-Saxon countries, including the United States: about 3–4 percentage points.
  - Sectoral patterns:
    - Most of the decline in the labor share is attributable to the fall in unskilled sectors.
    - Income share of labor in skilled sectors has risen, especially in Anglo-Saxon countries where it increased by about 5 percentage points.
    - Cumulative unskilled employment contraction in Europe of 10 percent; in the United States unskilled employment held steady but the earnings gap between skilled and unskilled sectors widened by 25 percent.
  - Despite falling labor share, real labor compensation expanded robustly in all advanced economies since 1980, with growth accelerating since the mid-1990s.
- Empirical evidence on offshoring and productivity:
  - Evidence is mixed; Amiti and Wei find significant positive effects of services offshoring and somewhat smaller positive effects of manufacturing offshoring on U.S. productivity.
- Policy-relevant empirical observation:
  - Countries that implemented reforms to lower labor costs to business and improve labor market flexibility generally experienced a smaller decline in the labor income share.

### Core empirical estimation results (aggregate and sectoral)
- Data and model:
  - Unbalanced panel of 18 advanced OECD economies over 1982–2002.
  - Labor shares corrected for self-employed income; prices and capital stock in 2000 U.S. dollars; labor stock represented by employment.
  - Key regressors include relative export/import/absorption prices, offshoring (imported intermediates share), immigration (share of immigrant employment), ICT capital (and square), and labor market policy indicators (tax wedge, replacement rate, indices).
  - Estimation: fixed effects, time dummies, Instrumental Variables (IV) to address endogeneity; instruments include share of government consumption in GDP, consumption tax rate, log total population, log export-weighted real GDP of trading partners, distance-weighted export-adjusted employment in rest of world, and lags.
- Preferred IV results (Table 1, column (4), observations: 208):
  - Relative export price (log of): -0.165 (5.42)***
  - Relative import price (log of): 0.123 (3.06)***
  - Offshoring: -0.234 (2.63)***
  - Immigration: -0.824 (5.00)***
  - ICT capital: -3.408 (4.26)***
  - ICT capital squared: 53.001 (3.61)***
  - Tax wedge: -0.002 (3.41)***
  - Unemployment benefits: -0.001 (5.09)***
  - Anderson test: 155.07***
  - Hansen test (p-value): 0.19
  - Adjusted R-squared (reported for OLS columns): 0.63–0.68
- Alternative specifications (selected IV results, Table 2):
  - ICT investment specification (column (1)):
    - Relative export price: -0.156 (5.27)***
    - Relative import price: 0.125 (3.39)***
    - Offshoring: -0.216 (2.13)**
    - Immigration: -0.879 (5.22)***
    - ICT capital: -0.939 (3.70)***
    - ICT capital squared: 3.307 (3.24)***
    - Anderson test: 158.09***
    - Hansen test (p-value): 0.14
  - Financial openness specification (column (4)):
    - Relative export price: -0.162 (5.43)***
    - Relative import price: 0.115 (2.92)***
    - Offshoring: -0.232 (3.11)***
    - Immigration: -0.839 (5.74)***
    - ICT capital: -2.724 (2.22)**
    - ICT capital squared: 44.464 (2.31)**
    - Anderson test: 96.96***
    - Hansen test (p-value): 0.16
- Skilled vs. unskilled sector estimates (Table 3, Three-Stage Least Squares; observations: 202):
  - Relative export price (log of): Skilled -0.068 (5.75)***; Unskilled -0.048 (6.79)***
  - Relative import price (log of): Skilled 0.050 (4.34)***; Unskilled 0.035 (5.11)***
  - Offshoring: Skilled -0.159 (3.26)***; Unskilled -0.035 (1.22)
  - Immigration: Skilled -0.496 (5.19)***; Unskilled -0.170 (2.99)***
  - ICT capital: Skilled -1.612 (3.73)***; Unskilled -1.286 (4.85)***

### Decompositions, elasticities, and implied effects of trade-price changes
- Decomposition approach:
  - Contribution of each variable to labor-share change = average annual change in the variable × IV coefficient (preferred specification, column (4), Table 1).
  - Labor globalization contribution = sum of trade prices, offshoring, and immigration contributions.
- Aggregate decomposition findings (1982–2002):
  - Labor globalization and technological progress both reduced the labor share; technological progress generally had a somewhat larger impact.
  - Changes in labor market policies generally had a smaller but positive impact on the labor share.
  - Each globalization channel individually plays a relatively small role; trade-price channel net effect small because declines in import prices tended to reduce labor share but were offset by declines in export prices.
  - Regional patterns:
    - Europe: labor share affected by both offshoring and immigration.
    - Anglo-Saxon countries: offshoring less important; declines in tax wedge (notably in United States) benefited labor share; Europe saw rises in unemployment benefit replacement rates hurting labor share.
- Key elasticities and quantified effects of trade-price changes:
  - Short-run elasticity: a 1 percent decline in the relative price of imports in advanced countries raises labor compensation per worker by 0.1 percent (for given employment) in one formulation; elsewhere reported as 0.3 percent (for given employment) — the Appendix reports both formulations in context of different elasticity derivations.
  - Appendix highlighted precise estimates:
    - A 1 percent decline in the relative price of imports raises labor compensation per worker by 0.3 percent (for given employment).
    - A 1 percent decline in the relative price of exports lowers labor compensation per worker by about 0.05 percent (for given employment) and lowers employment by 0.2 percent (for given labor compensation per worker).
  - Combining elasticities with actual changes in relative export and import prices over 1980–2004 for advanced countries implies:
    - a net cumulative increase of 2 percent in labor compensation per worker for given employment (or 0.08 percent on an annualized basis).
    - a net cumulative increase of 6 percent in employment for given labor compensation per worker (or 0.24 percent on an annualized basis).
  - Under the assumption of fixed employment, implied output effect of the decline in traded goods prices is close to zero (and even negative in some countries); when labor compensation per worker is held fixed, the decline in traded goods prices generates a positive output effect of the order of 4 percent, which together with the labor-compensation effects accounts for the total employment gain of 6 percent.
  - Conclusion: the decline in traded goods prices in advanced countries yielded a small but positive increase in labor compensation per worker (in real terms) and in employment over 25 years; globalization via cheaper imports increased aggregate real total workers’ compensation even as labor’s share fell.

### Longer-term labor supply projections
- UN projects a 40 percent rise in the world’s working-age population by 2050.
- Tentative projections in the paper suggest the effective global labor supply could more than double again by 2050.
- Projections for 2006–50 under assumptions (UN working-age projections; labor force participation converges to current U.S. rate; export-to-GDP ratio trends):
  - Cumulative growth in export-weighted global labor force over 2005–50 could range from a low of 120 percent (under low variant of population projections) to a high of 190 percent (under high variant).

### Policy implications and recommended responses
- Overarching recommendation: balance efficiency gains from trade and offshoring with policies that mitigate adverse distributional effects, particularly for unskilled workers.
- Three policy dimensions:
  1. Improve functioning of labor markets:
     - Reduce tax wedges to enable workers to take home a larger proportion of gross pay.
     - Ensure unemployment benefit replacement rates do not deter job search; consider duration and work-availability requirements.
     - Increase flexibility to help workers move from declining to expanding areas; design reform packages mindful of fiscal consequences.
  2. Strengthen access to education and training:
     - Develop workers’ skills to keep up with rapid technological change and innovation.
     - Emphasize quality, evaluation, and targeting of training.
     - Note skilled sectors adapted better to the ICT revolution than unskilled sectors.
  3. Ensure adequate social protection during adjustment:
     - Provide income support to cushion, but not obstruct, change.
     - Make health care less dependent on continued employment.
     - Increase portability of pension benefits in some countries to enhance labor mobility.
     - Target measures at trade-displaced workers (often older, less educated, industry-specific skills) and structure supplementary wage subsidies to avoid dulling job-search incentives.
- Policy note: policymakers in advanced economies should continue trade liberalization while ensuring sufficient domestic flexibility to adjust to globalization pressures and recognize adjustment costs.

### Data sources, measurement, and methodological notes (selected)
- Sectoral classification and skilled/unskilled definitions:
  - Skilled defined as at least upper secondary education; sector skill-intensity data from Jean and Nicoletti (2002) across 16 OECD economies (1994–1998).
  - 18 ISIC Rev. 3 sectors aggregated into unskilled and skilled; alternative three-category robustness checks confirm similar patterns.
- Labor compensation construction:
  - Augmented compensation of employees by income of self-employed, employers, family workers; assumed other categories earn the same average wage as employees (following Gollin (2002)).
  - Labor compensation = compensation of employees × (total employment / employees).
- Offshoring measurement:
  - Measured by imports of intermediate inputs from OECD Input-Output Tables (1995, 2002, 2006 editions); includes nonfuel manufacturing and services inputs; input-usage assumed proportional to import shares.
  - Sectoral offshoring intensities aggregated using gross output or value-added weights; series extended using OECD STAN and Groningen 60-industry Database.
- Global labor supply measures:
  - Export-weighted world labor force computed as sum across countries of national labor forces weighted by country’s ratio of non-oil exports to GDP (export-to-GDP ratio capped at one).
  - Educational composition from Barro-Lee (2000); share with higher education extrapolated linearly for 2001–05.
- Capital and ICT capital:
  - Capital stock series from Fajnzylber and Lederman (1999) extended using a 4 percent depreciation assumption.
  - IT capital stock from Jorgensen and Vu (2005); perpetual inventory method with specified depreciation rates and service lives for computer hardware, software, telecommunications equipment.
- Labor market policy indicators from Bassanini and Duval (2006) with original OECD sources for replacement rates, tax wedge, employment protection, product market regulation, and union density.
- Estimation and instruments:
  - Fixed effects, time dummies, IV and system estimations (iterated SUR and iterated 3SLS) used; instruments include lagged variables and macro controls listed above.
  - Elasticities and decompositions computed using IV coefficients (notably column (4), Table 1) and average annual changes over sample periods.

*Italic source: _wp07298 (IMF PDF content provided).*

### References..............................................................................................................

### _wp07298 - References

### Introduction
- Over the past two decades, labor markets have become increasingly integrated due to political changes and economic reforms in China, India, and the former Eastern bloc, and due to technological progress and removal of cross-border restrictions that permit the unbundling of production.
- Key questions addressed:
  - How rapidly has the global labor supply grown, and which channels of labor globalization have been most important?
  - To what extent can recent trends in labor shares and labor compensation in advanced economies be explained by the changing global labor supply relative to other factors such as technological change and labor market reform? Has the impact been different in skilled and unskilled sectors?
  - What policies can help advanced economies meet the challenges of further labor market globalization?
- Principal findings summarized:
  - The effective global labor force has risen fourfold over the last two decades.
  - Advanced economies access the growing global labor pool via imports of final goods, offshoring of intermediates, and immigration.
  - The decline in traded goods prices from labor globalization has contributed to rising real labor compensation in advanced economies by boosting productivity and output, while emerging market countries have also seen rising real wages.
  - Globalization is one of several factors reducing the labor share in advanced economies; rapid technological change has had a bigger impact, especially on unskilled-sector workers.
  - Countries that enacted reforms to lower the cost of labor to business and improve labor market flexibility have generally experienced a smaller decline in the labor income share.
- Policy implications highlighted:
  - Improve functioning of labor markets.
  - Strengthen access to education and training.
  - Ensure adequate social safety nets that cushion impacts without obstructing adjustment.

### How globalized is labor?
- Measuring effective global labor supply:
  - One approach weights each country’s labor force by its export-to-GDP ratio; by this measure, the effective global labor supply quadrupled between 1980 and 2005, with most of the increase after 1990.
  - East Asia contributed about half of the increase, driven by a marked rise in working-age population and rising trade openness; South Asia and the former Eastern bloc accounted for smaller increases.
  - While most of the absolute increase consisted of less-educated workers (those without higher education), the relative supply of workers with higher education increased by about 50 percent over the last 25 years, owing mostly to advanced economies, but also to China.
- Channels of access to global labor:
  - Trade has been the more important channel and has grown more rapidly than immigration, since immigration remains highly restricted in most countries.
  - The share of immigrants in the U.S. labor force is now close to 15 percent and hence comparable to the share of imports in GDP.
  - The increase in the share of immigrants over the last ten years was driven mostly by foreigners with tertiary education or at least secondary education.
- Trade patterns and terms of trade:
  - The share of developing country products in the imports of advanced economies has doubled since the early 1990s.
  - Developing countries’ share in world exports of skilled goods and services has been on the rise; China has led this shift toward more skill-intensive goods in its export basket.
  - At the aggregate level, trade expanded opportunities for advanced and developing economies; developing countries’ imports have been growing faster than those of advanced economies and the share of advanced economies’ exports going to developing countries has been rising.
  - The terms of trade of advanced economies have improved, by a cumulative 7 percent since 1980.
- Offshoring and imported intermediates:
  - Offshored inputs account for about half of total imports (the rest being imports of final products), but have grown somewhat more slowly than total trade.
  - Imports of intermediate manufacturing and services inputs (excluding energy) accounted for about 5 percent of gross output and about 10 percent of total intermediate inputs in advanced economies in 2003.
  - The share of offshored inputs in gross output ranges from 12 percent in Canada and the Netherlands to about 2–3 percent in Japan and the United States.
  - For manufacturing (10 countries with long series: G-7, Australia, Denmark, Netherlands), the share of imported manufacturing inputs in gross manufacturing output increased from 6 percent in 1980 to 10 percent in 2003.
  - In 2003, offshoring intensity in manufacturing ranged from 4 percent in Japan to about 25 percent in Canada.
  - Imports of service inputs by the overall economy remain low at 1 percent of gross output, though they have increased in some countries (Canada, Germany, the Netherlands).
  - The rise in offshoring in advanced economies has been driven mostly by imports of skilled rather than unskilled inputs.
  - The share of imported intermediates in total imports of unskilled products is 37 percent and for skilled products is 68 percent.
- Observations on skill composition:
  - Offshoring tends to involve the less skill-intensive stages within skilled sectors, but available data do not allow confirmation of this.
  - A bulk of advanced economies’ imports still come from other advanced economies and likely include more skilled products.
  - The global supply of labor with higher education has increased relative to labor with lower education.

### How has the globalization of labor affected workers in advanced economies?
- Theoretical expectations:
  - Traditional trade theory predicts integration of labor-abundant emerging markets will exert downward pressure on wages (corrected for productivity) of advanced-economy workers, implying a decline in the labor share of national income (labor share = labor compensation per worker / average worker productivity).
  - However, gains from trade and productivity-enhancing effects of offshoring (particularly in intermediates) could increase total income and real wages.
- Empirical patterns and findings:
  - There has been a clear decline in the labor share across advanced economies since the early 1980s.
  - The decline is stronger for the labor share than for the share of employees’ compensation, reflecting a reduction in the share of other categories of workers in the total workforce (self-employed, employers, family workers).
  - A portion of the post-1980s decline reverses the rise in labor shares seen in the 1970s, especially in Europe and Japan.
  - The decline in labor income share is attributable to multiple factors: globalization has contributed, but rapid technological change has had a larger impact—especially on unskilled-sector workers.
  - The decline in traded goods prices associated with labor globalization has contributed to rising real labor compensation in advanced economies by boosting productivity and output.
  - Empirical evidence on productivity effects of offshoring is mixed; some studies find positive effects (e.g., Amiti and Wei find significant positive effects of services offshoring and somewhat smaller positive effects of manufacturing offshoring on U.S. productivity), but overall evidence is limited and context-dependent.
- Policy-relevant empirical observation:
  - Countries that implemented reforms to lower labor costs to business and improve labor market flexibility generally experienced a smaller decline in the labor income share.

### Policy recommendations and forward-looking considerations
- To maximize benefits and address distributional impacts of labor globalization and technological change:
  - Improve the functioning of labor markets.
  - Strengthen access to education and training to help workers adjust to changing skill demands.
  - Ensure adequate social safety nets that cushion impacts on adversely affected workers while avoiding obstruction of necessary adjustment.
- Emphasis on balancing efficiency gains from trade/offshoring with policies that mitigate adverse distributional effects, particularly for unskilled workers.

*Italic source: _wp07298 - References (IMF PDF content provided).*

### Appendix I).

### Appendix I)

### Labor share trends and patterns
- Share of employees’ compensation in national income for the United States (data since 1930) does not appear to be at a historical low.
- The decline in the labor share since 1980:
  - Much more pronounced in Europe and Japan: about 10 percentage points.
  - In Anglo-Saxon countries, including the United States: about 3–4 percentage points.
  - Within Europe, strongest declines observed in Austria, Ireland, and the Netherlands.
- Sectoral patterns:
  - Most of the decline in the labor share is attributable to the fall in unskilled sectors.
  - Income share of labor in skilled sectors has risen, especially in Anglo-Saxon countries where it increased by about 5 percentage points.
  - Unskilled sectors: cumulative employment contraction in Europe of 10 percent; in the United States, unskilled employment held steady but real compensation per worker increased meagerly and the earnings gap between skilled and unskilled sectors widened by 25 percent.
- Despite falling labor share, real labor compensation expanded robustly in all advanced economies since 1980, with growth accelerating since the mid-1990s:
  - Anglo-Saxon countries: stronger weight on employment growth.
  - Europe: stronger weight on real compensation per worker; since mid-1990s employment growth in Europe has picked up, outpacing growth in real compensation per worker.

### Emerging market convergence
- Manufacturing sector real wages (PPP-corrected) in emerging market countries, particularly in Asia, have been catching up with the United States.
  - Rapid convergence and relatively high real wages in early developers: Hong Kong SAR, Korea, Singapore, Taiwan Province of China.
  - Slower, but accelerating, convergence in other Asian countries, including China.
- Studies indicate trade and emigration contributed to rising incomes in developing countries; evidence on impact on inequality is mixed.

### Forces affecting labor markets
- Main drivers over last two decades: globalization of labor and rapid technological change (ICT revolution).
  - ICT revolution favored skilled labor; patent applications rose strongly in OECD since early 1990s.
- Labor and product market policy changes notable for:
  1. Marked increase in generosity of unemployment benefits in Europe (average replacement rate), contrasting with a slight decline in Anglo-Saxon countries.
  2. General decline in the tax wedge, especially in the United States where it fell by about 10 percentage points since 1995.
  3. Substantial declines in legislated employment protection and product market regulation, especially in Europe and Japan.
  4. Persisting cross-country differences: low employment protection in United States/Anglo-Saxon countries; relatively high in Europe and Japan.
- Recent literature links reductions in tax wedge, reductions in unemployment benefits, deregulation, and more limited employment protection to employment growth and lower unemployment.

### Empirical methodology (model and data)
- Econometric model estimated on an unbalanced panel of 18 advanced OECD economies over 1982–2002.
- Labor shares corrected for self-employed income; prices and capital stock in 2000 U.S. dollars; labor stock represented by employment.
- Labor globalization measures:
  - Offshoring: share of imported intermediate inputs in total intermediate inputs.
  - Immigration: share of immigrant employment in total domestic employment.
  - Trade globalization: export and import prices relative to absorption price.
- ICT capital: share of ICT capital in total capital stock; effect represented by a quadratic to capture nonlinear learning effects.
- Labor market policies: tax wedge, replacement rate of unemployment benefits, indices of product market regulation, employment protection legislation, union density.
- Estimation approach:
  - Left- and right-hand variables demeaned with country-specific means (fixed effects); time dummies included.
  - Instrumental variables estimation used to address endogeneity of trade prices, offshoring, and immigration.
  - Instruments included: share of government consumption in GDP; consumption tax rate; log total population; log export-weighted real GDP of trading partners; distance-weighted export-adjusted employment in rest of world; and lags of (logs of) relative trade prices, offshoring, and immigration.
- Additional system estimated for labor shares in skilled (S) and unskilled (U) sectors with a symmetry restriction on certain coefficients; estimation by iterated SUR and iterated 3SLS using same instruments.

### Core estimation results (aggregate labor share)
- Key empirical findings (from IV regressions, preferred specification):
  - Higher relative export prices and lower relative import prices are associated with a lower labor share.
    - Interpretation: advanced economies’ exports are relatively capital intensive; imports increasingly from developing countries are relatively labor intensive.
  - Offshoring and immigration are negatively related to the labor share.
    - IV coefficients larger in absolute value than OLS, suggesting reverse causality (lower labor share reduces incentive to offshore and attract immigrants).
  - Technological progress (ICT capital) has a nonlinear effect on the labor share:
    - Adverse effect initially (learning phase), productivity-enhancing later.
  - Policy variables: higher tax wedges and higher unemployment benefit replacement rates are associated with a lower labor share.
    - Suggests these rigidities reduce employment more than they increase labor costs.
  - Employment protection index, product market regulation index, and union density were statistically insignificant in preferred aggregate specification and excluded.
  - Capital-labor ratio generally insignificant once labor market policies included.

- Robustness checks:
  - Results robust to exclusion of outliers and individual countries; partial correlation plots show robustness.
  - Alternative specifications (Table 2 highlights):
    - Using ICT investment instead of ICT capital retains nonlinear ICT effect.
    - Splitting import price into oil and non-oil confirms import price coefficient not driven by oil (oil effect insignificant).
    - Distinguishing offshoring of unskilled vs. skilled inputs: offshoring of skilled inputs has significant negative effect on labor share.
    - Including financial openness (sum of cross-border assets and liabilities in GDP, instrumented by distance-weighted financial openness in rest of world): coefficient negative but not statistically significant; other coefficients broadly unaffected.

### Skilled vs. unskilled sector results
- Labor globalization and technological progress affect skilled and unskilled sector labor shares differently:
  - Labor globalization has somewhat stronger effect on skilled sectors (consistent with offshoring increases concentrated in skilled inputs and immigrants being relatively high-educated).
  - Technological change negatively affects both skill groups but less strongly for skilled workers (consistent with ICT complementing skilled labor; nonlinear learning effects).
  - Product market regulation appears to benefit labor in unskilled sectors, though product market regulation had negligible impact on overall labor share.
- Classification caveat: measures refer to income shares of workers in skilled/unskilled sectors (sector-based), not directly to skilled/unskilled workers.

### Decomposition: contributions to labor share decline (1982–2002)
- Decomposition method: average annual change in each variable multiplied by IV coefficient from preferred model (column 4, Table 1).
- Summary of contributions:
  - Labor globalization and technological progress both acted to reduce the labor share; technological progress generally somewhat larger in impact.
  - Changes in labor market policies generally had a smaller but positive impact on the labor share.
  - Each globalization channel (trade prices, offshoring, immigration) individually plays a relatively small role.
  - Trade price channel: declines in import prices tended to reduce labor share but were broadly offset by declines in export prices (advanced economies’ exports are capital intensive), so net trade-price effect small; in large European countries and Japan the net effect from trade prices actually boosted the labor share.
- Regional differences:
  - Labor globalization contributed to labor share decline in most countries with broadly similar overall effects in Anglo-Saxon countries and Europe, but driven by different components:
    - Europe: labor share affected by both offshoring and immigration.
    - Anglo-Saxon countries: offshoring less important; declines in tax wedge (notably in United States) benefited the labor share; Europe saw rises in unemployment benefit replacement rates hurting labor share.
  - Technological change contributed to labor share reduction in both groups but less so in Anglo-Saxon countries. In the United States, ICT capital contribution even raised the labor share (possibly reflecting advanced IT use).
  - Differences in technological change and labor market policies account for about half of the difference in labor share changes between Anglo-Saxon countries and Europe; the rest is due to time-dummy contributions and residuals.

- Skilled vs. unskilled decomposition:
  - Unskilled sectors: main factor reducing income share of labor (beyond employment shift to skilled sectors) is technological change (ICT as substitute for unskilled labor).
  - Skilled sectors: labor globalization contributed to decline in income share of labor in skilled sectors more than in unskilled sectors (offshoring concentrated in skilled inputs; immigrants relatively educated). However, shift of employment toward skilled sectors more than offset this, and income share of labor in skilled sectors increased moderately.
  - Product market regulation reductions over sample had negative effect on income share in unskilled sectors because product market regulation tended to benefit unskilled labor.

### Labor compensation per worker, employment, and trade price elasticities
- Model allows computation of elasticities of labor compensation per worker and employment to trade prices (short-run and long-run), under assumption of fixed prices.
- Short-run elasticity (labor compensation per worker, given employment):
  - On average, a 1 percent decline in relative price of imports in advanced countries raises labor compensation per worker by 0.1 percent (for given employment).
- Long-run employment elasticities derived from model (formulas provided in text); percent changes in labor compensation per worker and employment are computed by multiplying elasticities by average percent changes in relative trade prices in each country.
- Caveat: elasticities derived assume fixed prices; price adjustments not taken into account in these calculations.

*Source: Appendix I). (Content unit: _wp07298 - Appendix I).)*

### 0.3 percent (for given labor compensation per worker). In contrast, a 1 percent decline in the

### _wp07298 - 0.3 percent (for given labor compensation per worker). In contrast, a 1 percent decline in the

### Key empirical elasticities and effects of trade price changes
- A 1 percent decline in the relative price of imports raises labor compensation per worker by 0.3 percent (for given employment).
- A 1 percent decline in the relative price of exports lowers labor compensation per worker by about 0.05 percent (for given employment) and lowers employment by 0.2 percent (for given labor compensation per worker).
- Combining these elasticities with actual changes in relative export and import prices over the period 1980–2004 for advanced countries implies:
  - a net cumulative increase of 2 percent in labor compensation per worker for given employment (or 0.08 percent on an annualized basis).
  - a net cumulative increase of 6 percent in employment for given labor compensation per worker (or 0.24 percent on an annualized basis).
- These effects are slightly larger for Anglo-Saxon countries and Japan.

### Implied output and labor-share mechanics
- Definition used: L R wL Y = . (labor share definition as stated in the source)
- Under the assumption of fixed employment, the implied output effect of the decline in traded goods prices is close to zero (and even negative in some countries); the observed 2 percent increase in labor compensation per worker reflects mostly an increase in the labor share brought about by the decline in traded goods prices.
- When labor compensation per worker is held fixed, the decline in traded goods prices generates a positive output effect of the order of 4 percent, which together with the labor-compensation effects accounts for the total employment gain of 6 percent.
- Conclusion: the decline in traded goods prices in advanced countries yielded a small but positive increase in labor compensation per worker (in real terms) and in employment over 25 years. Although the labor share went down, globalization via cheaper imports increased the “size of the pie,” producing a net gain in total workers’ compensation in real terms.

### Aggregate findings on drivers of labor-share decline
- Both labor globalization and technological change have been important factors behind the observed decline in labor shares in advanced economies.
- Rapid progress in ICT has had a particularly strong effect on the unskilled sectors.
- The role of labor market policies has differed across countries:
  - Positive effects largest in the United States.
  - Much more modest effects on average in Europe (and negative in some countries).
- Global competition has reduced international trade prices, and cheaper imports have increased real total labor compensation, implying workers participated in gains from a larger aggregate output even as their share fell.

### Longer-term labor supply and globalization projections
- There has been a dramatic increase in the size of the effective global labor force over the past two decades, with one measure suggesting it has risen fourfold.
- The UN projects a 40 percent rise in the world’s working-age population by 2050.
- Tentative projections suggest the effective global labor supply could more than double again by 2050.
- The global pool of labor can be accessed by advanced economies through imports and immigration; trade is the more important and faster-expanding channel.
- Offshoring of production of intermediates remains small in the overall economy, though manufacturing is more affected; imports of offshored intermediates have been growing somewhat more slowly than total trade.

### Policy implications and recommended responses
- Policymakers in advanced economies should continue trade liberalization while ensuring sufficient domestic flexibility to adjust to globalization pressures.
- Policies need to recognize adjustment costs and support those negatively affected by labor-market globalization.
- Broad policy responses along three dimensions:
  - Improve the functioning of labor markets:
    - Reduce tax wedges to enable workers to take home a larger proportion of gross pay.
    - Ensure unemployment benefit replacement rates do not deter job search.
    - Consider the duration of unemployment benefits and work availability requirements.
    - Increase flexibility to help workers move from declining to expanding areas; design reform packages mindful of fiscal consequences.
  - Improve access to education and training:
    - Develop workers’ skills to keep up with rapid technological change and innovation.
    - Note that skilled sectors adapted better to the ICT revolution than unskilled sectors.
    - Quality of spending on education and training is crucial; evaluation and targeting of training matter to maximize impact.
  - Ensure adequate social protection during adjustment:
    - Provide income support to cushion, but not obstruct, change.
    - Make health care less dependent on continued employment.
    - Increase portability of pension benefits in some countries to enhance labor mobility.
    - Consider measures targeted at trade-displaced workers, recognizing they may be older, less educated, and have industry-specific skills; structure any supplementary wage subsidies to avoid dulling job-search incentives.

*Source: _wp07298 - 0.3 percent (for given labor compensation per worker). In contrast, a 1 percent decline in the*

### APPENDIX I.  DATA SOURCES AND METHODS

### APPENDIX I.  DATA SOURCES AND METHODS

### Sectoral classification
- Analysis conducted for aggregate economy and by skill category; classification based on the skill intensity of the sector.
- Skilled exports: exports of goods and services typically produced by skill-intensive sectors.
- Skilled labor share: share of national income that accrues to workers in skill-intensive sectors.
- Limitation: does not capture within-sector shifts between skilled and unskilled workers due to lack of cross-country wage data for production (unskilled) and nonproduction (skilled) workers.
- Skilled/unskilled classification specifics:
  - A person is considered skilled if he or she has at least upper secondary education.
  - Data on average fraction of skilled labor in each sector (across 16 OECD economies from 1994 to 1998) are from Jean and Nicoletti (2002).
  - 18 sectors (International Standard Industrial Classification, Revision 3) are classified into two aggregates: unskilled and skilled.
  - An alternative three-category split (low-skill, medium-skill, high-skill) was also used for robustness; patterns for high- and low-skill aggregates similar to broader skilled/unskilled aggregates.

### Labor compensation and labor shares
- Labor compensation construction:
  - Augmented compensation of employees by income of other categories of workers (self-employed, employers, family workers).
  - Assumed other categories earn the same average wage as employees (following Gollin (2002)).
  - Labor compensation = compensation of employees × (total employment / employees).
- Korea excluded because some self-employed income is already in employees’ compensation, preventing correction.
- When sectoral data on employees or total employment were not available:
  - The ratio of total employment to total employees was assumed to be the same as in previous years or, if unavailable, equal to the average for this sector across other OECD economies.
  - The sum of “nonemployee” workers across sectors was constrained to add up to the aggregate total by scaling imputed nonemployee workers proportionately.
- Variable definitions:
  - Real labor compensation: labor compensation deflated by the CPI index from the IMF’s World Economic Outlook database.
  - Labor share: ratio of labor compensation and value added at basic prices.
    - Exceptions: Japan (value added at producer prices) and the United States (value added at market prices).
  - Share of labor in skilled (unskilled) sectors: ratio of labor compensation in skilled (unskilled) sectors to economy-wide value added.
- Main and supplemental data sources:
  - Main: OECD’s Structural Analysis (STAN) database.
  - Additional sources for employees’ compensation and value added: OECD National Accounts Statistics, United Nations National Accounts Statistics, Haver Analytics (Japan).
  - Additional sources for total employment and employees: OECD Employment and Labor Market Statistics, ILO Labor Statistics.
  - Calculations limited to advanced OECD economies due to data availability.

### Manufacturing wages
- Source: UNIDO Industrial Statistics Database for advanced and developing economies.
- Conversion: constant purchasing power parity (PPP) dollars using CPI indices and PPP exchange rates from the IMF’s World Economic Outlook database.
- China data: CEIC Asia database.

### Immigration
- Foreign labor force data:
  - Source: OECD’s Trends in International Migration (2003 edition for all countries except the United States).
  - United States: U.S. Bureau of Census and U.S. Bureau of Labor Statistics.
  - Italy, the Netherlands, Norway, United Kingdom: data refer to foreign employment instead of labor force.
  - Australia, Canada, United States: data refer to foreign-born labor force instead of foreign labor force.
- Time series handling:
  - Series extended backward using growth rates from stock of foreign (or foreign-born) population when available; missing years interpolated.
- Emigration and immigration by skill level for 1990 and 2000:
  - Source: Docquier and Marfouk (2005); refer to stock of emigrants to or immigrants into the OECD economies.

### Trade and offshoring
- Trade data sources:
  - Aggregate trade quantities and prices: IMF’s World Economic Outlook database (including non-oil goods and services aggregates).
  - Sectoral trade for advanced economies:
    - Manufacturing: OECD STAN Industrial Database.
    - Services: OECD International Trade in Services Database.
  - Developing countries:
    - Manufacturing: World Integrated Trade Solution.
    - Services: IMF’s Balance of Payments Statistics.
  - Manufacturing trade of advanced OECD economies by source country: OECD STAN Bilateral Trade Database.
  - Services data for India: CEIC Asia database.
- Offshoring definition and measurement:
  - Offshore outsourcing: outsourcing of intermediate production to companies in locations outside the country (foreign affiliates or independent companies).
  - Measured by imports of intermediate inputs from OECD Input-Output Tables (1995, 2002, 2006 editions).
  - Input-Output Tables assume import proportionality: an industry uses an import of a product in proportion to its total use of that product (economy-wide share of imports in domestic demand).
  - Measure includes only nonfuel manufacturing and services inputs.
  - Imported intermediate inputs of a sector are scaled by either the sector’s gross output or total use of intermediates.
  - Sectoral offshoring intensities aggregated using sectoral gross output weights; overall offshoring intensity interpolated for missing years.
- Extension beyond 2000:
  - OECD data extended using latest input-output table available (2000 for most countries) and updating import proportions for each intermediate input category.
  - Import proportions approximated by share of imports in domestic absorption (consumption and investment) for that product category (sector).
  - Data on imports by sectors: OECD STAN Industrial Database (manufacturing) and OECD International Trade in Services Database (services).
  - Value added by sector (for absorption calculations): combination of OECD STAN Industrial Database and Groningen 60-industry Database.
  - Sectoral offshoring intensities aggregated using sectoral value-added weights when sectoral gross output unavailable; historical and extended series spliced using growth rates.
- Imports of final goods and services: constructed as residual = total imports − imported intermediate inputs.

### Global labor supply
- Measures calculated:
  - World working-age population.
  - World labor force.
  - Export-weighted world labor force: sum across countries of national labor forces weighted by country’s ratio of non-oil exports to GDP (Harrigan and Balaban, 1999); export-to-GDP ratio capped at one.
- Data sources: World Economic Outlook, World Bank’s World Development Indicators, United Nations Population Projections, CEIC Asia databases.
- Global labor supply by education level:
  - Based on Barro-Lee (2000) dataset on educational attainment of population aged 15 or more.
  - Assumes share of labor force with higher education ≈ share of population aged 15 or more with higher education.
  - For 2001–05, this share extrapolated linearly for each country.
- Projections for 2006–50:
  - Based on UN projections of working-age population.
  - Labor force participation rate assumed to converge by 2050 to current U.S. rate of labor force participation.
  - Alternative assumption (rates remain at current levels) has little effect on projections.
  - Export-to-GDP ratio projections: World Economic Outlook projections until 2012; thereafter trend increase observed in world export-to-GDP ratio.
  - Under these assumptions, cumulative growth in export-weighted global labor force over 2005–50 could range from:
    - low of 120 percent (under low variant of population projections) to
    - high of 190 percent (under high variant).

### Capital stock and ICT capital
- Capital stock (entire economy):
  - Source: Fajnzylber and Lederman (1999), which extends Nehru and Dhareshwar (1993) series by adding annual gross fixed capital formation flows and assuming a 4 percent depreciation rate to preexisting capital stock.
  - Fajnzylber and Lederman (1999) updated to recent years using same methodology.
- IT investment and IT capital stock:
  - Source: Jorgensen and Vu (2005) using national expenditure data for computer hardware, software, telecommunications equipment.
  - Perpetual inventory method with varying depreciation rates and service lives:
    - Computer hardware: geometric depreciation rate 31.5 percent; service life 7 years.
    - Software: geometric depreciation rate 31.5 percent; service life 5 years.
    - Telecommunications equipment: geometric depreciation rate 11 percent; service life 11 years.

### Labor market policies indicators
- Indicators provided by Bassanini and Duval (2006); original data sources indicated below.
- Average unemployment benefit replacement rate:
  - Average of replacement rates corresponding to multiple income, family, and unemployment duration situations:
    - Two income situations: 100 percent and 67 percent of average production worker earnings.
    - Three family situations: single; with dependent spouse; with spouse in work.
    - Three unemployment durations: 1st year; 2nd and 3rd years; 4th and 5th years.
  - Original data: OECD Benefits and Wages Database.
- Labor tax wedge:
  - Difference between labor cost to employer and net take-home pay for single-earner couple with two children earning 100 percent of average production worker earnings.
  - Sum of personal income tax and all social security contributions expressed as percentage of total labor cost.
  - Original data: OECD Taxing Wages Database.
- Employment protection legislation:
  - OECD summary indicator of stringency of Employment Protection Legislation.
  - Original data: OECD Employment Outlook (2004).
- Product market regulation:
  - OECD summary indicator of regulatory impediments to product market competition in seven nonmanufacturing industries (gas, electricity, post, telecom, passenger air transport, railways passenger and freight services, road freight).
  - Original data: Conway and others (2006).
- Union density:
  - Share of workers affiliated with a trade union.
  - Original data: OECD Employment Outlook (2004).

*APPENDIX I.  DATA SOURCES AND METHODS*

### APPENDIX II. DERIVATION OF THE EMPIRICAL MODEL

### APPENDIX II. DERIVATION OF THE EMPIRICAL MODEL

### Model specification
- The paper employs an economy-wide translog revenue function with fixed factor quantities (of labor and capital) and exogenous product prices (of exports, imports, and domestic absorption).
- Function arguments:
  - p: product prices (P_E, P_M, P_A denote prices of exports, imports, and absorption)
  - v: factor quantities (L = labor, K = capital)
  - z: shift variables capturing factors that shift the revenue function
- Assumptions:
  - The revenue function is symmetric and linearly homogeneous in product prices and factor quantities.
  - Symmetry implies α_ij = α_ji and β_ij = β_ji.
  - Linear homogeneity in product prices:
    - Σ_i α_i = 1
    - Σ_i Σ_j γ_ij = 0
  - Linear homogeneity in factor quantities:
    - Σ_i β_i = 1
    - Σ_i Σ_j β_ij γ_ji = 0

### Homogeneity and symmetry restrictions
- Symmetry requirements and homogeneity restrictions are imposed on the translog revenue function to derive share equations.
- These restrictions lead to expressing the labor-share equation in terms of relative prices and quantities to impose linear homogeneity.

### Output and input share equations (share form)
- Output supply and inverse input demand equations in share form are obtained by differentiating the revenue function with respect to prices and quantities, respectively.
- Notation:
  - S: output shares
  - R: input shares
- Focus of analysis: labor share (second share equation), augmented by shifters z.

### Augmenting the labor-share equation (estimating equation)
- The labor-share equation is expressed in logs of relative prices and quantities and augmented by the following shifters:
  - X: intensity of offshoring
  - L_M: share of immigrants in the domestic labor force (immigration)
  - K_ICT: share of ICT capital in total capital (and its square)
  - LMP: measures of labor market policies (tax wedge, replacement rate of unemployment benefits, product market regulation index, employment protection legislation index, union density)
- The estimating equation (log-linearized labor share) includes:
  - ln P_E, ln P_M, ln P_A (relative trade prices)
  - ln L, ln K, ln(L/K) terms
  - offshoring, immigration, K_ICT and K_ICT^2, labor market policy variables
  - fixed effects (demeaning) and time dummies
  - disturbance term ε

### Skilled and unskilled labor-share system
- Derivation extends to a three-factor revenue function with:
  - labor in skilled sectors (S)
  - labor in unskilled sectors (U)
  - capital (K)
- This produces a system of two labor-share equations (skilled and unskilled).
- Symmetry implies β_SU = β_US (coefficients on log labor-capital ratios cross-appearances are equal).

### Elasticities: short-run and long-run
- Short-run elasticities of labor compensation per worker to trade prices (given employment) are obtained from the share-based model:
  - ε_{(p),L} = ∂ ln R_L / ∂ ln p_i = -γ_{iL} + … (as derived)
  - For i = E (exports), M (imports); shares R_L and S_i evaluated at sample mean for each country.
- Long-run employment elasticities with respect to trade prices (given labor compensation per worker) are obtained from sub-matrices of the matrix of short-run elasticities E:
  - ε_{i,W} = (E_{iW} - E_{iL} E_{LL}^{-1} E_{LW})^{-1} … (presentation in text)
  - Where (,)1_LL L_L WLR R β ε = + − and i = E, M.
- Important caveat: these elasticities are derived from a model that assumes fixed prices; potential price adjustments are not taken into account.

### Key empirical estimates (selected results from tables)
- Table 1: Impact of Labor Globalization and Technological Change on Labor Shares — selected coefficients (observations: 208; fixed effects and time dummies included)
  - Instrumental Variables Estimation, Preferred Model (column (4)) — coefficients (t-statistics in parentheses):
    - Relative export price (log of): -0.165 (5.42)***
    - Relative import price (log of): 0.123 (3.06)***
    - Labor-capital ratio (log of): -0.02 (0.58)
    - Offshoring: -0.234 (2.63)***
    - Immigration: -0.824 (5.00)***
    - ICT capital: -3.408 (4.26)***
    - ICT capital squared: 53.001 (3.61)***
    - Tax wedge: -0.002 (3.41)***
    - Unemployment benefits: -0.001 (5.09)***
  - Anderson test: 155.07***
  - Hansen test (p-value): 0.19
  - Adjusted R-squared (reported for OLS columns): 0.63–0.68

- Table 2: Alternative specifications (observations: 208)
  - IV Estimation (column (1), ICT Investment specification):
    - Relative export price (log of): -0.156 (5.27)***
    - Relative import price (log of): 0.125 (3.39)***
    - Offshoring: -0.216 (2.13)**
    - Immigration: -0.879 (5.22)***
    - ICT capital: -0.939 (3.70)***
    - ICT capital squared: 3.307 (3.24)***
    - Anderson test: 158.09***
    - Hansen test (p-value): 0.14
  - IV Estimation (column (4), Financial Openness):
    - Relative export price (log of): -0.162 (5.43)***
    - Relative import price (log of): 0.115 (2.92)***
    - Offshoring: -0.232 (3.11)***
    - Immigration: -0.839 (5.74)***
    - ICT capital: -2.724 (2.22)**
    - ICT capital squared: 44.464 (2.31)**
    - Anderson test: 96.96***
    - Hansen test (p-value): 0.16

- Table 3: Skilled and Unskilled Labor Shares (Three-Stage Least Squares and Seemingly Unrelated Regressions; observations: 202)
  - Three-Stage Least Squares (columns (1) Skilled, (2) Unskilled):
    - Relative export price (log of): Skilled -0.068 (5.75)***; Unskilled -0.048 (6.79)***
    - Relative import price (log of): Skilled 0.050 (4.34)***; Unskilled 0.035 (5.11)***
    - Skilled labor-capital ratio (log): 0.177 (12.21)*** (Skilled equation)
    - Unskilled labor-capital ratio (log): -0.161 (18.23)*** (Skilled equation)
    - Offshoring: Skilled -0.159 (3.26)***; Unskilled -0.035 (1.22)
    - Immigration: Skilled -0.496 (5.19)***; Unskilled -0.170 (2.99)***
    - ICT capital: Skilled -1.612 (3.73)***; Unskilled -1.286 (4.85)***

### Estimation details and instruments
- Left-hand and right-hand side variables are demeaned using country-specific means (equivalent to panel estimation with fixed effects) and time dummies are included.
- Instrumental variable strategy (used in IV and 3SLS estimations) instruments for logs of relative export and import prices, offshoring, and immigration using:
  - lagged values of these variables
  - share of government consumption in GDP
  - consumption tax rate
  - log of total population
  - log of export-weighted real GDP of trading partners
  - distance-weighted, export-adjusted employment in the rest of the world
- In some specifications (Table 2, column (4)), financial openness is instrumented by the distance-weighted financial openness in the rest of the world.
- Note on ICT measure:
  - In Table 2 column (1) ICT denotes share of ICT investment in total investment; in other columns ICT denotes share of ICT capital in total capital stock.

### Additional methodological notes
- Offshoring measures constructed using OECD Input-Output Tables and extended using OECD STAN and Groningen 60-Industry Database for series extension.
- Elasticities and decompositions (Figures referenced in the appendix) are computed using regression coefficients (notably from column (4) of Table 1) and average annual changes in the explanatory variables over relevant sample periods (e.g., 1982–2002; 1986–2001 for Japan in some figures).
- The contribution decomposition method: contribution of each variable = average annual change in the variable × regression coefficient on the variable; labor globalization contribution is the sum of trade prices, offshoring, and immigration contributions.

*Source: IMF staff calculations (APPENDIX II. DERIVATION OF THE EMPIRICAL MODEL).*

### REFERENCES

### _wp07298 - REFERENCES

### Works on offshoring, outsourcing, and globalization
- Amiti, Mary, and Shang-Jin Wei, 2005, “Fear of Service Outsourcing: Is It Justified?” Economic Policy, Vol. 20 (April), pp. 308–47.
- Amiti, Mary, and Shang-Jin Wei, 2006, “Service Offshoring and Productivity: Evidence from the United States,” NBER Working Paper No. 11926 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Blinder, Alan S., 2006, “Offshoring: The Next Industrial Revolution?” Foreign Affairs, Vol. 85 (March/April).
- Grossman, Gene M., and Esteban Rossi-Hansberg, 2006, “The Rise of Offshoring: It’s Not Wine for Cloth Anymore,” paper presented at Federal Reserve Bank of Kansas City symposium, “The New Economic Geography: Effects and Policy Implications,” Jackson Hole, Wyoming, August 24–26. Available via the Internet: http://www.kc.frb.org/PUBLICAT/SYMPOS/2006/PDF/Grossmanand-Rossi-Hansberg.paper.0831.pdf
- Jensen, J. Bradford, and Lori G. Kletzer, 2005, “Tradable Services: Understanding the Scope and Impact of Services Outsourcing,” IIE Working Paper No. WP05-9 (Washington: Institute for International Economics).
- Olsen, Karsten Bjerring, 2006, “Productivity Impacts of Offshoring and Outsourcing: A Review,” OECD Science, Technology and Industry Working Paper No. 2006/1 (Paris: Organization for Economic Cooperation and Development).
- Feenstra, Robert C., 2007, “Globalization and Its Impact on Labor,” Global Economy Lecture 2007, Vienna Institute for International Economic Studies, Vienna, February 8. Available via the Internet: http://www.econ.ucdavis.edu/faculty/fzfeens/papers.html

### Labor markets, wages, and distributional effects
- Annett, Anthony, 2006, “Lessons from Successful Labor Market Reformers in Europe,” in Euro Area Policies: Selected Issues, IMF Country Report No. 06/288 (Washington: International Monetary Fund).
- Bassanini, Andrea, and Romain Duval, 2006, “Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions,” OECD Economics Department Working Paper No. 486 (Paris: Organization for Economic Cooperation and Development).
- Berg, Andrew, and Anne O. Krueger, 2003, “Trade, Growth, and Poverty: A Selective Survey,” IMF Working Paper 03/30 (Washington: International Monetary Fund).
- Blanchard, Olivier, 1998, “Revisiting European Unemployment: Unemployment, Capital Accumulation and Factor Prices,” NBER Working Paper No. 6566 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Freeman, Richard B., 1995, “Are Your Wages Set in Beijing?” Journal of Economic Perspectives, Vol. 9 (Summer), pp. 15–32.
- Freeman, Richard B., 2006, “Labor Market Imbalances: Shortages, or Surpluses, or Fish Stories?” paper presented at the Boston Federal Reserve Economic Conference, “Global Imbalances—As Giants Evolve,” Chatham, Massachusetts, June 14–16.
- Harrison, Anne E., 2002, “Has Globalization Eroded Labor’s Share? Some Cross-Country Evidence,” (unpublished; Berkeley, California: University of California at Berkeley).
- Guscina, Anastasia, 2006, “Effects of Globalization on Labor’s Share in National Income,” IMF Working Paper 06/294 (Washington: International Monetary Fund).
- Jean, Sébastien, and Giuseppe Nicoletti, 2002, “Product Market Regulation and Wage Premia in Europe and North America: An Empirical Investigation,” OECD Economics Department Working Paper No. 318 (Paris: Organization for Economic Cooperation and Development).
- Katz, Larry F., and David H. Autor, 1999, “Changes in the Wage Structure and Earnings Inequality,” in Handbook of Labor Economics, Vol. 3A, ed. by Orley C. Ashenfelter and David Card (Amsterdam: North-Holland).
- Slaughter, Matthew J., 2001, “International Trade and Labor-Demand Elasticities,” Journal of International Economics, Vol. 54 (June), pp. 27–56.
- Greenwood, Michael J., Gary Hunt, and Ulrich Kohli, 1996, “The Short-Run and Long-Run Factor-Market Consequences of Immigration to the United States,” Journal of Regional Science, Vol. 36 (February), pp. 43–66.
- Docquier, Frédéric, and Abdeslam Marfouk, 2005, “International Migration by Educational Attainment, 1990–2000,” in International Migration, Remittances and the Brain Drain, ed. by Ç. Özden and M. Schiff (Washington: World Bank).
- Rodrik, Dani, 2006, “What’s So Special About China’s Exports?” NBER Working Paper No. 11947 (Cambridge, Massachusetts: National Bureau of Economic Research).

### Productivity, growth, and technology
- Fajnzylber, Pablo, and Daniel Lederman, 1999, “Economic Reforms and Total Factor Productivity Growth in Latin America and the Caribbean (1950–95)—An Empirical Note,” Policy Research Working Paper No. 2114 (Washington: World Bank).
- Feenstra, Robert C., 2004, Advanced International Trade: Theory and Evidence (Princeton, New Jersey: Princeton University Press).
- Jorgenson, Dale W., and Khuong Vu, 2005, “Information Technology and the World Economy,” Scandinavian Journal of Economics, Vol. 107 (December), pp. 631–50.
- Young, Alwyn, 1995, “The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience,” Quarterly Journal of Economics, Vol. 110 (August), pp. 641–80.
- Young, Alwyn, 2003, “Gold into Base Metals: Productivity Growth in the People’s Republic of China During the Reform Period,” Journal of Political Economy, Vol. 111 (December), pp. 1220–61.
- Gollin, Douglas, 2002, “Getting Income Shares Right,” Journal of Political Economy, Vol. 110 (April), pp. 458–74.
- Kohli, Ulrich, 1991, Technology, Duality, and Foreign Trade: The GNP Function Approach to Modeling Imports and Exports (Ann Arbor: University of Michigan Press).
- Nehru, Vikram, and Ashok Dhareshwar, 1993, “A New Database on Physical Capital Stock: Sources, Methodology, and Results,” Revista de Análisis Económico, Vol. 8, No. 1, pp. 37–59.

### Trade theory, empirical trade, and international economics
- Feenstra, Robert C., 2004, Advanced International Trade: Theory and Evidence (Princeton, New Jersey: Princeton University Press).
- Harrigan, James, 1998, “International Trade and American Wages in General Equilibrium, 1967–1995,” Staff Report No. 46 (New York: Federal Reserve Bank of New York).
- Harrigan, James, and Rita A. Balaban, 1999, “U.S. Wages in General Equilibrium: The Effects of Prices, Technology, and Factor Supplies, 1963–1991,” NBER Working Paper No. 6981 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Slaughter, Matthew J., 2001, “International Trade and Labor-Demand Elasticities,” Journal of International Economics, Vol. 54 (June), pp. 27–56.
- Lewer, Joshua J., and Hendrik Van den Berg, 2003, “How Large Is International Trade’s Effect on Economic Growth?” Journal of Economic Surveys, Vol. 17 (July), pp. 363–96.
- Rodrik, Dani, 2006, “What’s So Special About China’s Exports?” NBER Working Paper No. 11947 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Tytell, Irina and Shang-Jin Wei, 2004, “Does Financial Globalization Induce Better Macroeconomic Policies?,” IMF Working Paper 04/84 (Washington: International Monetary Fund).

### Organization reports, working papers, and outlooks
- Organization for Economic Cooperation and Development (OECD), 2004, OECD Employment Outlook (Paris).
- Organization for Economic Cooperation and Development (OECD), 2005, “Trade-Adjustment Costs in OECD Labour Markets: A Mountain or a Molehill?” in OECD Employment Outlook (Paris).
- Organization for Economic Cooperation and Development (OECD), 2006a, “The Internationalisation of Production, International Outsourcing and OECD Labour Markets” (Paris).
- Organization for Economic Cooperation and Development (OECD), 2006b, “Migration in OECD Countries: Labour Market Impact and Integration Issues” (Paris).
- International Monetary Fund, 2006, World Economic Outlook, September (Washington, D.C.).
- International Monetary Fund, 2007, World Economic Outlook, April (Washington, D.C.).
- World Bank, 2006, Global Economic Prospects 2007: Managing the Next Wave of Globalization (Washington).

*Source: _wp07298 - REFERENCES*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07298.pdf_